200-300 words APA format.
How can CVP Analysis be used to predict future costs and profitability? Describe how CVP analysis is used, or could be used, at your current place of employment. If you have not worked for a company that might use CVP Analysis, you may choose a well-known company and describe how you envision that company using CVP Analysis. Try to discuss a concept associated with CVP not already addressed by your classmates. Consider using an article to summarize or apply the CVP concepts. To participate in follow-up discussion, choose one of the topics/concepts that a classmate has posted and provide your own reaction to it, add to what they posted or provide a professional disagreement to their posting.
Please include proper citations in your discussion post. Points will be deducted if proper citations are not used.
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Cost volume profit analysis is a tool that companies can use to determine how cost can affect their profits whether it is from sales volume or prices. Cost can be identified by the company as fixed and variable while the volume discusses the number of products that a company sale. Profit on the other hand is associated with the income that the company makes minus all cost associated with the product. Most companies use the CVP analysis method to either break even, determine their target profit, or evaluate or make decisions for their business.
The break-even analysis gives the company the ability to not gain a profit but not take any losses associated with the product as well. This is important for a business to ensure they are not underselling a product. If the company is not at less breaking even, then they may be in potential hazards with loosing the business. I believe this is important to use when jump starting a business. Target Profit is when the company uses the Cost Volume profit to figure out how much sales is required to meet a profit area that they are trying to get to. A business may sponsor another business in the hopes that can increase their sales. By using the CVP analysis they can figure out when the sponsorship can help or hinder their business.
An example of a business that I worked at that used CVP was Larry’s. Now I see how all restaurants are doing it now. Larry’s had started allowing their customers to make reservations online verses calling it in. I think that is very important with the way technology is blossoming today. Larry’s also gave their customers the benefit of ordering on line. I think Larry’s did this to boost their sales by making it convenient for their customers to be able to make appointments and order via internet. Although Larry’s had chosen the CVP method break even analysis they wanted to ensure they are not paying more for the services than what they are bringing in. Just like Classy Cuisine Fine Dining used a service called OpenTable reservation systems (Barton & MacArthur, 2016). The Open Table Reservation offered online reservation services. Both companies had low traffic and wanted to ensure that by getting their customers to use this online method it wouldn’t cost them more being that they are charged with the website but also every book appointment it calls for a fee as well. I think this was smart of them to help boost their revenue.
Barton, T. L., & MacArthur, J. B. (2016). A TEACHING CASE ON THE BENEFITS AND COSTS OF RESTAURANTS USING OPENTABLE ONLINE RESTAURANT RESERVATIONS. Journal of Business & Accounting, 9(1), 126-135.